ThinkEquity starts Durect at buy
ThinkEquity has initiated coverage of Durect (NASDAQ:DRRX) with a “buy” rating and $3 price target based on a sum-of-the-parts analysis. The stock closed at 78 cents on Thursday.
“While Durect has had a bumpy road over the past few years in our view, we continue to see a compelling combination of large-pharma collaborations, with an undervalued pipeline that could provide potential upside surprise,” writes analyst James Molloy.
Durect’s lead product is Remoxy, a less-abusable Oxycontin partnered with Pfizer, which potentially could be re-filed with the FDA by late 2013. In the second half of 2012, he figures Durect could file an NDA for the post-surgical pain injection Posidur, partnered with Hospira and targeting 10 million to 20 million annual surgeries. Durect also has a deep pipeline of early pain compounds, Mr. Molloy added.
He values Remoxy at $1.50 a share based on a five-times multiple of estimated 2017 royalties, discounted back 5 years at 25% to account for the development risk to the program, and Posidur at $1 a share, based on a five times multiple of estimated 2017 royalties discounted back 5 years at 40% to account for the development risk to the program. He pegged the value of the base business, estimated cash at the end of 2012 and the technology value at 50 cents a share.